Such is the far-reaching terror inspired by China’s economic miracle that it now occupies a central role in the demonology of protectionist-minded politicians. It’s an easy populist card to play, all the more because there is some truth to it. First comes outsourcing and the gradual “hollowing out” of hallowed national industries as thousands of ancillary tasks and jobs go overseas; then their ultimate destruction, as China (and India), having gained invaluable expertise, move to being aggressive exporters in their own right.
This is precisely the kind of pork-barrel rhetoric EU trade commissioner Peter Mandelson finds himself up against as he struggles, so far unsuccessfully, to negotiate a sensible destination for 80 million items of embargoed Chinese clothing currently clogging up Europe’s ports.
The interesting thing about this trade dispute is how much better businessmen seem to deal with such problems than politicians, sometimes in rather unexpected ways. Clothes retailers have seen the EU-China quota war brewing for quite some time. Many – and these include Zara, New Look, Primark and now Debenhams and Next – have been quietly reversing the conventional economic wisdom by pulling their production and sourcing out of China and placing it elsewhere.
To be sure, a part of this is simply common sense. Who, after all, would wish to be the hapless piggy in the middle of a potential trade war?
But their real guiding principle seems to be the realisation that quality and keen pricing are themselves no longer sufficient conditions for pleasing the ever-more demanding consumer. Time to market has also become a vital constituent. In the world of “fast fashion”, the 22 days it takes to ship manufactured product by sea from China to the UK is simply too long. For this reason they have shown steadily increasing interest in eastern Europe and Turkey (up to five days delivery time), even though the garments are more expensive to manufacture there. It’s a far cry from the heyday of Marks & Spencer 20 years ago, when retailers would book their stock requirements 18 months in advance.
So China’s competitive threat to western markets is not always as straightforward as it appears. From a marketing point of view, a potentially more interesting trend is the Trojan horse brand strategy. As some of China’s home-grown companies reach sufficient maturity to launch onto the international market, they seem to be doing things differently to their Japanese and South Korean predecessors. Last year’s headline deal between IBM and Lenovo, China’s leading computer company, to acquire IBM’s personal computer business (including licensed use of the IBM name) may point the way.
In a similar vein, Haier – its largest white and home goods manufacturer – recently made an inconclusive bid for US Hoover maker Maytag. And who could forget that curiously opaque scrap between the Shanghai Automotive Industry Corporation (SAIC) and the Nanjing Automobile Corporation for the bones of MG Rover?